Cleveland Fed looks at loans to oil and gas industry

Loans to oil and gas industry expected to deteriorate somewhat, but Fourth District bankers and bank supervisors are not sounding the alarm

The decline in oil and gas prices has led to cutbacks and layoffs in the oil and gas industry. According to the Federal Reserve Board’s most recent Senior Loan Officer Opinion Survey, bankers expect the quality of loans made to the oil and natural gas drilling or extraction sector to deteriorate somewhat this year. That said, the bankers surveyed indicated that their exposures are small and that they are taking steps to mitigate the risk of loan losses.

Banks in the Fourth Federal Reserve District, which comprises Ohio, western Pennsylvania, the northern panhandle of West Virginia, and eastern Kentucky, are among those with increased exposures to the oil and gas industry, says Jenni Frazer, an assistant vice president and deputy regional officer of the Federal Reserve Bank of Cleveland’s Cincinnati Branch. While noting that bankers have increased their oversight and monitoring of impacted borrowers, Frazer says there’s no sense of alarm. “In the short term, the oil and gas industry can withstand these lower prices,” she says.

Regulators have two roles when a particular risk escalates, according to Frazer. “It’s our job to make sure that bankers have the right risk management processes in place to know their exposures and where the risks lie. We also have a responsibility to understand the risks nationally or even globally for the industry to make sure there isn’t a systemic risk that would impact financial stability,” she says.

To find out more, read Monitoring Energy Exposures in the Cleveland Fed's Forefront magazine.

Gleaned from interviews with three Cleveland Fed board and council members, Forefront also provides some insights about new trucking technologies, healthcare’s increasing focus on the consumer, and ways the payments industry is defending against ‘crooks.’ Read what Charles L. Hammel III, president of PITT OHIO, Mike Keresman, CEO of CardinalCommerce, and Deborah Feldman, president and CEO of Dayton Children’s Hospital, had to say in Eyes on the Road, Expanded Coverage, & EMV.

And there's still time to register for the Cleveland Fed's Policy Summit on Housing, Human Capital, and Inequality. Join us in Pittsburgh on June 18-19, 2015, for engaging presentations, discussion, and interactive sessions focused on community and economic development.

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell, doug.campbell@clev.frb.org, 513.218.1892